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Macroeconomic Determinants Of Shadow Banking – Evidence From Eu Countries

Author

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  • TEODORA CRISTINA BARBU

    () (Bucharest University of Economic Studies, Faculty of Finance and Banking, Bucharest, ROMANIA)

  • IUSTINA ALINA BOITAN

    () (Bucharest University of Economic Studies, Faculty of Finance and Banking, Bucharest, ROMANIA)

  • SORIN IULIAN CIOACA

    () (Bucharest University of Economic Studies, Faculty of Finance and Banking, Bucharest, ROMANIA)

Abstract

Shadow banking is a topical, debated issue on the agenda of national and European macro-prudential regulatory and supervisory authorities. It is generally accepted that shadow banks and the traditional banking system have some core functions in common, such as credit and maturity transformation, and the exposure to similar risks. However, the tight banking regulations and the decreasing trend recorded by interest rates in the post-crisis period create prospects for shadow banking sector growth. Against this background, the present paper aims at investigating the particular impact that shadow banking activity exerts on macroeconomic fundamentals. The analysis covers 15 European Union countries, including Romania, during the period 2008 – 2015, using quarterly data. Shadow banking system is used as a proxy by monetary funds, due to breaks in the series or unbalanced number of observations across selected countries. By employing panel regression, it was found that the shadow banking total assets’ variation is negatively influenced by the GDP growth, short term interest rates, M2/GDP ratio and the ratio of investment funds’ assets in GDP, and positively determined by stock index dynamics and long term interest rates. The findings sustain the literature’s point of view.

Suggested Citation

  • Teodora Cristina Barbu & Iustina Alina Boitan & Sorin Iulian Cioaca, 2016. "Macroeconomic Determinants Of Shadow Banking – Evidence From Eu Countries," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 18, pages 11-129, December.
    • Handle: RePEc:aic:revebs:y:2016:j:18:barbut
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    References listed on IDEAS

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    1. Roland Meeks & Benjamin Nelson & Piergiorgio Alessandri, 2017. "Shadow Banks and Macroeconomic Instability," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 49(7), pages 1483-1516, October.
    2. Bryan J. Noeth & Rajdeep Sengupta, 2011. "Is shadow banking really banking?," The Regional Economist, Federal Reserve Bank of St. Louis, issue Oct, pages 8-13.
    3. Jo Michell, 2017. "Do Shadow Banks Create Money? ‘Financialisation’ and the Monetary Circuit," Metroeconomica, Wiley Blackwell, vol. 68(2), pages 354-377, May.
    4. Duca, John V., 2014. "What drives the shadow banking system in the short and long run?," Working Papers 1401, Federal Reserve Bank of Dallas.
    5. Gorton, Gary & Metrick, Andrew, 2012. "Securitized banking and the run on repo," Journal of Financial Economics, Elsevier, vol. 104(3), pages 425-451.
    6. Werner, Richard A., 2014. "How do banks create money, and why can other firms not do the same? An explanation for the coexistence of lending and deposit-taking," International Review of Financial Analysis, Elsevier, vol. 36(C), pages 71-77.
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    More about this item

    Keywords

    Shadow Banking; monetary funds; macroeconomic determinants; panel data;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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